SEC Adopts Rules to Enhance Proxy Voting Disclosure by Registered Investment Funds and Require Disclosure of “Say-on-Pay” Votes for Institutional Investment Managers
Rules and form amendments will enhance transparency of fund and institutional investment manager proxy voting records
Washington D.C., Nov. 2, 2022 —
The Securities and Exchange Commission today adopted amendments to Form N-PX to enhance the information mutual funds, exchange-traded funds, and certain other registered funds report about their proxy votes. The amendments will make these funds’ proxy voting records more usable and easier to analyze, improving investors’ ability to monitor how their funds vote and compare different funds’ voting records. The rulemaking will also newly require institutional investment managers to disclose how they voted on executive compensation, or so-called “say-on-pay” matters, which fulfills one of the remaining rulemaking mandates under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“I am pleased to support these amendments because they will allow investors to better understand and analyze how their funds and managers are voting on shares held on their behalf,” said SEC Chair Gary Gensler. “The amendments will provide investors with more detailed information about proxy votes, create more consistency around how funds describe their proxy votes, and structure Form N-PX in a machine-readable format. This rulemaking also will require institutional investment managers to disclose how they voted on ‘say-on-pay’ matters, which fulfills the mandate under Section 951 of the Dodd-Frank Act of 2010. Together, these enhancements to Form N-PX would make it more useful, and more usable, to investors.”
For nearly 20 years, registered funds have been required to disclose their proxy voting records on Form N-PX, but, prior to today’s amendments, investors have faced difficulties analyzing these reports. For example, funds were not previously required to disclose votes in a consistent manner or in a format that is machine-readable.
To enhance proxy vote reporting, the amendments will require funds and managers to categorize each matter by type and, where a form of proxy or “proxy card” subject to the Commission’s proxy rules is available, tie the description and order of voting matters to the issuer’s form of proxy to help investors identify votes of interest and compare voting records. The changes also prescribe how funds and managers must organize their reports and require them to use a structured data language to make the filings easier to analyze. Funds and managers will also be required to disclose the number of shares that were voted or instructed to be voted, as well as the number of shares loaned and not recalled and thus not voted. This latter requirement is designed to provide shareholders with context to understand how securities lending activities could affect a fund’s or manager’s proxy voting practices.
The new rules and form amendments will be effective for votes occurring on or after July 1, 2023, with the first filings subject to the amendments due in 2024.